The Government announced they were introducing the Coronavirus Job Retention Scheme on 20th March 2020. Under this scheme, businesses regardless of size or sector, can place employees on “furlough leave”.
Updated 1st June 2020
On 29 May 2020, the Government announced its update to the Furlough Scheme. The key points relating to that update are summarised below:
- 10 June 2020 will be the last date on which an employer can place an employee on furlough.
- During June and July the Government will continue to pay 80% of wages up to a cap of £2,500 as well as the employer’s national insurance and pension contributions for any time employees are on furlough and not working.
- From 1 July 2020, the concept of “flexible furlough” is being introduced, meaning that employees can return to work on a part time basis and be furloughed for the remaining time. It will be for employers to decide upon the percentage split. Employers, however, will be responsible for 100% of pay whilst an employee is working, but will still be able to recover 80% of salary for any period spent on furlough, up to the end of August 2020. Any working hours arrangement agreed with your employees must cover at least one week and must be confirmed to the employee in writing.
- From 1 August 2020, employers will continue to benefit from the 80% reimbursement for employees’ salary but will have to pay employer national insurance contributions (ER NICs) and pension contributions and will not be able to reclaim these through the Furlough Scheme.
- From 1 September 2020, only 70% of salary (up to a maximum of £2,187.50) will be recoverable from the Government for time not worked under the Furlough Scheme. Employers will, however, be required to top-up payments by a further 10% to 80% of wages (up to the cap of £2,500) and will continue to be responsible for ER NICS and pension contributions.
- From 1 October 2020, only 60% of salary (up to a maximum of £1,875) will be recoverable from the Government. Employers will be required to top-up payments by a further 20% to 80% of wages (up to the cap of £2,500) and will continue to be responsible for ER NICS and pension contributions.
- The cap on the furlough grant will be proportional to the hours not worked.
- The Furlough Scheme will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that have been furloughed for a full three-week period prior to 30 June 2020. This means that the final date on which an employee can be furloughed for the first time is 10 June 2020 (for the current three-week furlough period to be completed by 30 June). Employers will have until 31 July to make any claims in respect of the period to 30 June 2020.
- Further guidance for employers as to how to calculate claims should be available from 12 June 2020.
Updated 17th April 2020
Earlier this week, HMRC published the fourth iteration of the Coronavirus Job Retention Scheme. Additionally, a direction has now been issued by the Treasury to HMRC containing rules applicable to the scheme.
Notably, the latest amendments change the date for eligibility for furlough leave from 28th February to 19th March. This means that employers can now place employees on furlough leave if they were on PAYE payroll on or before 19th March 2020. It does however, add a formerly unknown element which could impact employees who were previously thought to be covered by the scheme. To be eligible the employees have to have been notified to HMRC on an RTI submission on or before 19th March 2020.
The Treasury Direction also includes a new requirement for employees to have agreed in writing to cease all work for their employer during furlough leave. This is a departure from previous guidance which indicated that notification would be sufficient. No doubt this will have a huge impact on many employers, who opted either to seek implied consent or who relied on short-time working/lay off clauses to notify their employees of their furloughed status.
If you have any questions about the recent changes or furlough leave generally then please contact Aimée Johns on 0116 402 7252 or email Aimée.Johns@bhwsolicitors.com.
Published 2nd April 2020
Over the last couple of weeks, small amounts of information have been disseminated by the government regarding who is eligible for furlough leave and what employers need to do to claim, but there is yet to be a clear set of guidelines published.
We do know that under the scheme, an employer will be able to claim a grant from HMRC to cover the lower of 80% of an employee’s regular wage, or £2,500 per month gross, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. An employee will have to be placed on furlough leave for a minimum of three weeks in order for their employer to claim from HMRC via an online portal which is yet to be finalised. The employer is not under an obligation to top up the remaining 20% of salary but can opt to do so.
It is of course not as simple as a business closing its doors and informing employees they should no longer come into work. The scheme is intended for use as an alternative to redundancies wherever possible. All employers are still being encouraged to explore home working for all employees that can effectively work from home.
If an employer decides to take advantage of the scheme, they will need to identify which employees will be designated as “furloughed staff” and notify them of the intended change of their status. When decided who to select, businesses need to take a fair approach to help prevent future discrimination claims.
A lot of employers will be familiar with the phrases “short-term working” and “lay-off”, however many employment contracts will not contain these aforementioned provisions. Without these, employers will need to obtain consent from their employees before placing them on furlough leave. This is particularly critical when reducing salaries.
It is important that employees on furlough leave do not undertake any work for their employer during this period, meaning that employers cannot seek to use this scheme as a way to part pay salaries and ask employees to keep working.
Until legislation is published detailing the scheme and the HMRC online portal goes live, employers are unlikely to have a full picture of the scheme and its requirements and it is therefore imperative that existing employment law is taken into consideration when furloughing employees.
If you have any questions about furloughing employees or the impact of coronavirus on your business then please contact Aimée Johns on 0116 402 7252 or email Aimee.Johns@bhwsolicitors.com.